Shares of Samsung Electronics (KRX: 005930) soared about 5% in the past few days as investors anticipated a stronger-than-expected first quarter for the South Korean tech titan.

Fundamental analysis: Profit in Q1 likely up 44%

Samsung’s profit in the quarter between January and March likely rose by 44% thanks to strong sales of smartphones, TVs and home appliances, the company said today. However, the profit in the tech giant’s chip unit is estimated to fall by 20% after a storm halted production at the company’s plant in the United States. 

Consumers have been spending significantly more on electronics amid the coronavirus pandemic, which has also caused a global deficit of semiconductor chips. Samsung reported operating profit of 9.3 trillion won ($8.3 billion), in line with analysts’ estimates.

This marks Samsung’s highest operating profit level for Q1 since 2018. Analysts expected the company’s revenue to climb by 12% while Samsung reported a surge of 17%.

It appears that Samsung’s mobile unit is likely its best performer in Q1, after the launch of its flagship model Galaxy S21 in mid-January. Samsung is estimated to have accounted for about 23% of the global market in Q1 after launching the S21 and pricing it cheaper-than-usual for its flagship models. S21 costs $200 less than its predecessor S20. 

Analysts also expect high-margin accessories including Galaxy Buds to have performed very well in the quarter and expect operating profit for this unit to be up by over 1 trillion won compared to last year to about 4.15 trillion won. 

However, analysts estimated that Samsung’s semiconductor unit’s profit will be down around 20% to 3.6 trillion won after a winter storm halted production at its Texas plant in February. 

Technical analysis: 2-month highs hit

Samsung stock price gained over 4% last week to erase losses from the early in the week after analysts released their expectations for the first quarter. Overall, shares of Samsung are up over 5% in April.

Samsung Electronics daily chart (TradingView)

Today’s earnings release from Samsung came in pretty much in line with the analysts’ estimates, allowing the price action to stay trading near the 2-month highs. The price action is now approaching the resistance zone around 86800.

Summary

Samsung’s profit in the first quarter is likely up 45% thanks to strong sales of smartphones, TVs, and home appliances. As a result, shares are up about 5% to trade near the 2-month highs. 

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